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December 5, 2018

The 2,800 hospitals facing VBP penalties (or bonuses) in 2019

Daily Briefing

    By Eric Fontana, Managing Director and Cameron Ferrey, Data Consultant

    Hot on the heels of releasing the Hospital Readmissions Reduction Program (HRRP) results this fall, CMS has released the FY 2019 Value-Based Purchasing (VBP) Program results earlier this week.

    FY 2019 is the seventh year of the VBP Program, which adjusts Medicare inpatient reimbursement payments based on hospitals' performance on quality and patient experience measures. Each year, CMS withholds a percentage of inpatient payments from each hospital to fund the program. For FY 2019, the withholding percentage was 2%, or a total of approximately $1.9B in Medicare reimbursement placed at risk through the program's value-based incentive model.

    If a hospital performs well on VBP metrics, it can earn back more than the withheld amount, effectively earning a bonus overall. Hospitals that perform poorly can have their payments further reduced. The VBP program assesses hospital performance relative to their peers on quality and costs as well as their own performance over time. For FY 2019, the domains—each worth 25%—were:

    • Clinical care;
    • Efficiency and cost reduction;
    • Person and community engagement; and
    • Safety.

      Here are three quick takes from our early analysis of this year's results:

    1. Rising performance improved average outcomes at the hospital level…

      Overall hospital performance edged up slightly, with the average Total Performance Score (TPS) climbing to 38.1 from 37.4 in FY 2018. Correspondingly, the average bonus ticked up from .60% (FY 2018) to .61% (FY 2019) of base operating revenue, and the average penalty decreased from .41% (FY 2018) to .39% (FY 2019).

    2. …but not all hospitals saw equal gains

      Despite overall improvement, the rising tide didn't lift all ships equally. The average bonus for rural hospitals fell from .46% to .44%, while urban hospitals saw an increase in their average bonus from .70% in FY 2018 to .90% in FY 2019. Similarly, though small hospitals (under 200 beds) saw the same average bonus as last year—.34%—large hospitals (over 200 beds) saw their average penalty decrease to .08% (from .10% in FY 2018).

    3. Outlier performance shifted downward

      At the extremes, the largest VBP penalty assessed in FY 2019 is expected to be approximately $1.6M, whereas the largest VBP bonus for a hospital in the top decile of performers is expected to be around $3.3M.  This represents a downward shift compared to FY 2018, when the largest bonus was over $4.0M and the largest penalty was only $1.4M.  In similar fashion, only 9 hospitals are slated to earn bonuses of over $1M (down from 15 in FY 2018), whereas 10 of the poorest performers will face penalties exceeding $1M (up from 7 in FY 2018).

    Stay tuned for our combined FY 2019 Pay-for-Performance analysis when CMS releases results for the Hospital-Acquired Condition (HAC) Reduction Program in the coming weeks.

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